Introduction Target audience Managing expectations Scams Purchase Orders pre-order homework negotiations payment terms contract terms Project

Transcription

1 Introduction Target audience Managing expectations Scams Purchase Orders pre-order homework negotiations payment terms contract terms Project Management Q&A

2 Introduction Recording, slides & follow up notes No-sales-pitch promise Q & A Target audience Managing expectations Don t hope In China, nothing is easy. Everything is possible.

3 PassageMaker Sourcing Solutions

4 China Sourcing Scams: How bad is the problem really? What type of buyer is more likely to have problems? High Risk of encountering a scam Small Orders E-buyers/ Online Wholesale High value/ small size product (SD card for example) Famous Brand Electronics Novice Buyer (no PO, no audits, no due diligence ) Novice Buyers have high risk of encountering problems even if seller is not a scam

5 Truth about sourcing Famous Brands (Fashion to Electronics) online: Made-in-China doesn t mean Available-in-China Pricing/ Taxes Tight control of distribution Factory Back Door? Q: Why do the scam artist target small scale foreign buyers? A: Easy to find, easy to trick, easy to avoid. Lack of security measures (before, during or after) Assuming there is a safety net Seduced & forgot to ask what if Too willing to gamble

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7 No Chinese language Cell phone for contact Wrong area codes Sloppy quote TOO GOOD TO BE TRUE!

8 Typical Scam 1: The Classic Receive the money and don t ship anything. Run away or ignore the buyer. Typical Scam 2: It s on the way Proof of shipment is easy Typical Scam 3: Milk the Cow After receipt of deposit, get the buyer to pay for additional export fees then don t ship and/or disappear. Advanced Scams for 2014 Scam Case Study 1: The Shanghai Surprise Hacked . Buyer AND Seller Surprised Scam Case Study 2: Zhejiang Screw job Hacked . Buyer is the mark

9 Types of Sellers Factories (WFOE vs FIE vs Local) Brokers/Trading Companies Wholesalers Retailers

10 Pre-order homework Finding a supplier is easy, BUT finding the right supplier is not 15 years 300 pages 10 videos 1 power point slide Basic Steps 1. Define the ideal supplier s attributes Location, Equipment, Product Experience, Size 2. Online Research (GlobalSources.com) 100 s of potential suppliers 3. Be picky! Select 5 to 15 candidate factories that have a good fit and make initial contact. Don t focus on price at this step! 4. Audit & Due Diligence on top 2 or 3 5. Test order 6. Full order

11 Terms of Payment vs. Transfer of Ownership Dangers of ExW

12 4 General Negotiation Tips Orient yourself toward the decision maker Have a Baijiu Back Door Using a translator (slow down, prep terms, bring your own) Relax Trick: Western Speaker of Chinese Negotiating Price Don t rely on your negotiation skills. Do rely on your research skills.

13 Payments & Financial Risk Road map to better terms Financial Exposure = Quality Exposure (assuming you have done your due diligence) If worried about traditional risk? Free: & online research Check references How long on Global Sources? Affordable & essential: Onsite 3 rd party audits Financial due diligence

14 Top 10 lessons learned the hard way during my 15 years in China: 1. Use a Purchase Order! Get it chopped. 2. State lead times & penalties 3. Plan for IP protection 4. Plan for non-conforming goods 5. Know your risk as importer of record 6. Clarify ownership of tooling 7. Appropriate legal jurisdiction 8. Bi-lingual contract 9. Payment linked to performance 10.Written QC Plan is integrated into contract (reference: PQM template at Same Name on Contract, Bank Account & Factory Gate

15 Communications Paris or Bali? Western Buyer Asian Supplier

16 Professional Project Management 专业的项目管理 Fixed schedule for regular updates 制定计划定期进行信息通报 Be open about problems and solutions 坦诚公布问题及解决方案 Task 任务 Current Status 当前进度 Deadline for action item 实施项目的截止日期 Who is Responsible for Action Item 实施项目的负责人 Due date for next update 下次通报日 Date of last update received 收到最近一次通报的日 Buyer Comments 买家评价 Supplier Comments 供应商评价 Additional Notes 其他说明

17 Professional Communications 专业的邮件沟通

18 QC Fundamentals As we advance from Concept to Production to Delivery, the cost associated with testing and fixing any problems increase exponentially.

19 The QC toolbox FREE Tools 1. Do they have a Quality Manual? PQM template available at 2. Ask for references 3. Link payments to performance ( ) INEXPENSIVE Tools 3 rd Party Factory Audits, Product Inspections & Lab Testing

20 Hallmarks of a great factory (in terms of QC): Traceability QC goals: not met and forget QC director doesn t report to production manager Find problems early in the production process. Live and breath the ISO system

21 Disclaimer on China Intellectual Property Vast majority of suppliers are honest and a pleasure to deal with. Unfortunately in a market as massive and competitive as China, IP is often a casualty. Common IP concerns Supplier turn into competitors Illegal use of brand and designs Reverse engineering Midnight shifts Going direct to your buyers without you

22 Register * Limit Exposure * Monitor * Enforce 1. Register IP concerns in eyes of Government, Ports & Suppliers FTM vs. FTR (affordable and effective) 2. Limit Exposure a) pre-production phase (trade shows & RFQ) b) Production phase Who has access? (traders? aub-suppliers?) Compartmentalize (AKA black box assembly ) Own the tooling 30% rule Why the low price? 3. Monitor trade shows, tool room, stock room, show room, company website, taobao.com, brochures, dummy customer 4. Enforce demand letters, litigation & investigation

23 Tips for setting up the NDA/NC Align interests Be more than just a PO# Leverage Face Bi-lingual & simple Attached to each PO Per-agreed penalty Non-conforming goods

24 Includes templates for PO, Supplier Contract, Factory Audits, QC guidelines, RFQ and more $58 USD online (or at Amazon)

25 If take away just 3 things Find the right supplier Q & A If you can t afford audits & inspections in China you shouldn t be buying from China MikeB@SourcingInfo.org Name is the Same (Bank account/ contract/ address)

26 Booth # 1H39(Oct 11 14) 7S37(Oct 19 22) 10L35(Oct 27 30)